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Ulta Beauty (ULTA) Looks Splendid: Up More Than 20% in 3 Months

Ulta Beauty, Inc. ULTA appears to be in solid shape. The company’s shares have increased 21.2% in the past three months compared with the industry’s growth of 19.2%. The company has been benefiting from its robust omnichannel operations and strength in all categories – especially skincare. Focus on core priorities is certainly working well for this Zacks Rank #2 (Buy) company.

These aspects were visible in the company’s third-quarter fiscal 2022 results, with the top and the bottom line cruising past the Zacks Consensus Estimate and increasing year over year. Considering the third-quarter performance and anticipations for the fourth quarter, management raised its fiscal 2022 outlook. The consensus mark for the current fiscal year earnings per share has gone up from $21.34 to $22.87 over the past 60 days.

Let’s delve deeper.

Key Upsides

Ulta Beauty is known for its strategy of striking the right balance between online and physical stores. The company’s buy online, pickup in store (BOPIS) continued to gain traction in the third quarter. BOPIS sales rose 18% and contributed 23% to e-commerce sales. With consumers inclining toward online sales, management remains on track with expanding capacity at fulfillment centers, expansion of ship-from-store capabilities and curbside pickups.

Store traffic trends were robust in the third quarter, surpassing the pre-pandemic levels. During the quarter, the company introduced 18 new stores and relocated one. For fiscal 2022, it expects 47 net new stores and 33 store remodeling and relocation projects.

Ulta Beauty has been seeing market share gains in major beauty categories for a while now, with skincare standing out, thanks to consumers’ rising interest in self-care and the company’s focus on newness and innovation. The trend continued in the third quarter of fiscal 2022, wherein skincare remained the company’s fastest-growing category. This resulted from product innovation and new brands. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for this category.

The company has been focused on its six strategic priorities. The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. Next, the company is undertaking various tools to enhance guests’ experience, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Thirdly, the company concentrates on offering customers a curated and exclusive range of beauty products through innovation. Fourthly, the company is focused on deepening customer engagement by boosting rewards and loyalty programs. Fifthly, management is committed to optimizing its cost structure. Apart from these, the company strives to boost organizational talent and strengthen its culture.

Ulta Beauty Inc. Price, Consensus and EPS Surprise

Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty Inc. Price, Consensus and EPS Surprise

Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote


A Look at Q3 & Ahead

The company witnessed growth in all major categories and all its store and digital channels in the third quarter. Ulta Beauty also saw a higher market share in prestige beauty compared with the year-ago period. Ulta Beauty now expects fiscal 2022 net sales in the range of $9.95-$10 billion compared with the $9.65-$9.75 billion range expected in the second-quarter earnings call.

Comps are expected to rise in the range of 12.6-13.2% compared with the earlier view of 9.5-10.5%. The company projects 6-8% comp growth in the fourth quarter. For fiscal 2022, management now expects the operating margin to be between 15.5% and 15.6%, which was earlier expected between 14.6% and 14.8%.  For fiscal 2022, earnings are envisioned in the range of $22.6-$22.9 per share now, up from the $20.7-$21.2 per share range expected before.

Clearly, the beauty retailer is set to keep its growth story going.

3 Other Solid Retail Bets

We have highlighted three other well-ranked stocks, including Build-A-Bear Workshop, Inc. BBW, DICK’S Sporting Goods DKS and Five Below FIVE

Build-A-Bear Workshop currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for Build-A-Bear Workshop’s current financial year sales suggests growth of 11.9% from the year-ago period.

BBW, which is a multi-channel retailer of plush animals and related products has a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK'S Sporting, which operates as a sporting goods retailer, carries a Zacks Rank #2 at present. The company has a trailing four-quarter earnings surprise of nearly 10.1%, on average.

The Zacks Consensus Estimate for DICK'S Sporting’s current financial year’s revenues and EPS suggests declines of almost 1% and 23.9%, respectively, from the year-ago reported figures. DKS has an expected EPS growth rate of 5% for three to five years.

Five Below, an extreme-value retailer for tweens, teens and beyond, carries a Zacks Rank #2. FIVE has an expected EPS growth rate of almost 19% for three to five years.

The Zacks Consensus Estimate for Five Below’s current financial year sales suggests growth of 7.4%, respectively, from the year-ago period. Five Below has a trailing four-quarter earnings surprise of 26.3%, on average.

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DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report

Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report

BuildABear Workshop, Inc. (BBW) : Free Stock Analysis Report

Five Below, Inc. (FIVE) : Free Stock Analysis Report

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